Multi-scale Dynamic Correlation Between Climate Shock and China's Stock Market: Evidence Based on High Frequency Data

Mingyu Shu (), Jieli Wang, Menglong Chen and Hanru Wang
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Mingyu Shu: Hefei University of Economics
Jieli Wang: Anhui Universty
Menglong Chen: Hefei University of Economics
Hanru Wang: Hefei University of Economics

Computational Economics, 2025, vol. 66, issue 3, No 16, 2265-2304

Abstract: Abstract Recent climate events, such as extreme weather patterns and natural disasters, have led to significant financial losses and market volatility. This study was conducted to address the practical need for understanding how these climate shocks impact the Chinese stock market, particularly in terms of risk management and investment strategies. Three climate shock indices were developed by analyzing news text data from November 19, 2018, to November 4, 2023, and combining high-frequency data from nine industry indices of the Shanghai Stock Exchange. Text analysis methods were used in this process. TVP-VAR-DY and TVP-VAR-BK models were established to explore the multi-scale correlation between climate shock indices and volatility in the Chinese stock market, including upward and downward risks. The research results indicate a significant correlation between climate shocks and the Chinese stock market, with a certain time lag in their impact. These findings provide actionable insights for investors and financial institutions, enabling them to better anticipate and mitigate the effects of climate shocks on their portfolios, thereby enhancing risk management and investment efficiency.

Keywords: China stock; Climate stock; High frequency data; TVP- VAR- BK; TVP- VAR- DY (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10614-024-10790-3

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